Yahoo Finance Why Did Chipotle’s 1Q16 Same-Store Sales Growth Decline?
E. Coli Aftermath: Chipotle’s 2016 Outlook Looks Bleak
Same-store sales growth
Same-store sales growth is expressed as a percentage. It measures the increase in revenue from existing restaurants over a certain period. Same-store sales growth is driven by ticket size and traffic. It’s an important metric for investors to monitor. It increases a company’s revenue without increasing capital investment. It’s a direct reflection of how much traffic each location is driving without simply adding more stores.
1Q16 performance
Chipotle Mexican Grill (CMG) posted a decline in its same-store sales growth of 29.7%. It was lower than analysts’ estimate of 28.6%. The decline in same-store sales growth was mainly due to a decline in traffic. It was down by 21.1%. After the poor performance of -36.4% in January, the company showed some improvement. In February, its same-store sales growth was -26.1%. By mid-March, its same-store sales growth was -20% to -25%.
In March 2016, four of its employees in Boston were sick. Following Chipotle’s protocol, the employees didn’t report for work. According to its enhanced food safety procedures, the company temporarily closed its restaurants. The incident circulated in the news as another outbreak. This hurt the company’s recovery. In March, the same-store sales growth was -26.4%.
To win back its customers, the company implemented several enhanced food safety measures and conducted aggressive marketing and promotional campaigns. Under the “Rain Check mobile promotion,” customers redeemed over 6 million free burritos in February and March. The mobile offer was followed by direct mail promotions. More than 20 million households were contacted. It’s important to note that 17.5% of the mail promotions were redeemed. Despite all of these efforts, the first three weeks of April showed mixed results. The same-store sales growth was -26%. Chipotle also forms 0.08% of the holdings of the iShares Core S&P 500 ETF (IVV).
Peer comparison
In 1Q16, Panera Bread (PNRA) and Brinker International (EAT) recorded same-store sales growth of 4.7% and -3.6%. Shake Shack (SHAK) is expected to record same-store sales growth of 4.6%. Analysts expect Shake Shack to post earnings before interest and tax margins of 8.4%—compared to 8.7% in 1Q15.
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